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Jessica, Dallas, TX
The simple answer to this question is yes, but you should carefully consider all the pros and cons. There are many benefits that come from having good credit, low interest rates being only one of them. Good credit loans are plentiful, whereas bad credit home loans offer fewer opportunities. However, that doesn't mean that bad credit home loans are impossible.
The best advice would be to spend some time improving your credit before applying for a loan. However, sometimes waiting for your credit score to improve means paying for rent, which in the end may actually add up and be more expensive than taking a loan with slightly higher interest rates. Regardless of whether you want to take the loan now or wait, improving your credit score is always a good idea.
How Do You Improve Your Credit Rating?
First, be aware that this process can take up to two years, so be prepared to devote that time working on your credit. The next step is to find out what is currently in your credit report. You are entitled to get one free credit report from each of the main agencies per year. After you have your credit report, look it over to verify that it is accurate.
You could also try to determine your loan eligibility to get a more complete picture of your finances. You will want to find your income to debt ratio - to determine that, you should add all of your debts (including the loan you will need to buy the house). Divide that number by the cash available per month. A score of approximately 40% is preferable and should be able to get you a traditional bank home loan. Nevertheless, because we work with a panel of 167 lenders, our bad credit home loans offer is much more varied and we can work with you even if it is lower than 40%.
Acquire New Credit
Once you've done this much and your credit still needs help, you can further improve it by acquiring new credit. If you already have credit cards, make sure you pay them on time.
Secured cards are designed especially for the purpose of repairing credit - they allow you to put up a deposit to draw from when you use the card. After you've been using the card for a while and the company sees that you are serious about improving your credit (by paying your bills on time), they will increase how much you can borrow. Because these card companies also report the results to all three of the credit reporting agencies, you will see your rating consistently improve over time.
If you don't want to wait for your credit to improve, there are still some home loan options for buyers with bad credit. These are called subprime mortgage home loans. The only thing you should remember about home loans is that you will likely spend a number of years paying it off. Be absolutely sure that you are agree to the terms before you sign.
UnitedFinances.com is a good place to start researching your home loans options. Taking advantage of our services means we can do the comparing for you, which can save you both time and money.
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